<PAGE>



                                                       
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K/A
                                 AMENDMENT NO.2

(Mark One)
[ X ] Annual Report  pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 (Fee required) For the year ended December 31, 1996, or

[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
        For the transition period from ____________ to ____________

                         Commission File Number: 0-13459


                       AXIOHM TRANSACTION SOLUTIONS, INC.
                      (formerly named DH TECHNOLOGY, INC.)
             (Exact name of registrant as specified in its charter)


CALIFORNIA                                                 94-2917470
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                  15070 AVENUE OF SCIENCE, SAN DIEGO, CA 92128
            (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (619) 451-3485

        Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par
value                                                     (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes XXX No _____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [___]

The  aggregate  market  value of the Common Stock held by  non-affiliates  as of
March 03, 1997,  (based on the last sales price at that date) was  approximately
$132,674,740.  This computation  excludes a total of 54,897 shares  beneficially
owned by certain  executive  officers  and  directors of  Registrant  who may be
deemed to be affiliates of Registrant  under  applicable rules of the Securities
and  Exchange  Commission.   This  determination  of  affiliate  status  is  not
necessarily a conclusive determination for other purposes.

As of March 03, 1997, there were 7,975,777  shares of Registrant's  Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

The  Registrant's  Annual Report to Shareholders for the year ended December 31,
1996,  is  incorporated  by reference to Exhibit 13 hereto to the extent  stated
herein.  The  Registrant's  definitive Proxy Statement for its Annual Meeting of
Shareholders  to be held on April 24th,  1997, is  incorporated  by reference in
Part III of this Form 10-K to the extent stated herein.

<PAGE>
This  Amendment  No. 2 to the  Registrant's  Annual  Report on Form 10-K for the
fiscal year ended  December  31,  1996 is being filed  solely for the purpose of
correcting the report of the  Registrant's  independent  auditors to relect that
such auditors have signed such report. 

<PAGE>


                                     PART I

ITEM 1.    Business

General

DH Technology, Inc., a California corporation (the "Company," unless the context
otherwise  requires,  the term "Company"  refers to DH Technology,  Inc. and its
consolidated  subsidiaries),  was  incorporated  in 1983.  The Company  designs,
manufactures,  and sells transaction printers and mechanisms,  impact printheads
and magnetic heads, bar code printers,  and related services and supplies,  such
as labels and ribbons.  The Company also offers printhead repair and replacement
services.  The Company's  products provide  printing  solutions for many diverse
applications,  including  freight  and bar  code  labels,  retail  point-of-sale
transactions,   gasoline  vending  receipts,   and  airline   ticketing.   Other
applications  include  banking  and  ATM  transactions,   health  care  industry
transactions, data processing reports, gaming tickets, and multi-part forms.

The Company's products are marketed and sold worldwide via a direct sales force,
sales representatives,  value added resellers, and distributors. Company offices
are maintained in the United States, the United Kingdom, Mexico, and Australia.

The Company develops products that serve the  application-specific  needs of its
customers as well as products focused on general market  requirements.  To serve
these  markets  and  applications,  the  Company  uses a broad range of printing
technologies, including impact, thermal, and laser.

Impact  printing  can form a variety of  characters,  graphics,  or bar codes by
printing  vertical  columns of dots in combinations of patterns as the printhead
sweeps  horizontally  across a page.  Impact printing permits multiple fonts and
multiple  language  characters to be intermixed  under software control and also
prints color graphics, bar codes, and multi-part forms. Compared with non-impact
printers, impact printers generally have the advantages of lower operating costs
and higher reliability.

Thermal printing is accomplished either directly or through the use of a ribbon.
Direct thermal  printing  creates images directly on specially  treated paper by
transferring  heat to the  paper  using  a  linear  array  of  miniature  heater
elements.  Thermal  transfer  printing uses a ribbon that transfers  images onto
untreated paper, using a linear array of miniature heater elements.

Laser printing is  accomplished  by applying an electrical  charge to an organic
photo  conductive  drum  assembly,  applying toner to the drum assembly via this
charge  and  transferring  the  toner to the  print  medium  with an  additional
electrical  charge.  Once the toner is transferred to the print medium,  a fuser
assembly fuses the toner permanently onto the print medium.

Products

The Company's products are designed for precision,  reliability,  and durability
and, as such, operate using a full range of print speeds.

     Impact Printheads and Magnetic Heads

     The Company's  impact printhead  products are divided into 10 series.  They
     range from 7 to 42 wires per head and 200 to 1200  characters per second in
     print speeds.  Printheads are used in a multitude of  transaction  printing
     applications,  such as office  automation,  data processing,  point-of-sale
     receipts,  bank  transaction  printing,   lottery  tickets,   entertainment
     tickets, and airline tickets.

     Impact  printheads  are used in transaction  printing  devices where speed,
     versatility,  multi-part forms capability,  reliability, and relatively low
     cost are  important  factors.  Technological  advances  by the  Company and
     others  now  enable  impact  printheads  to print text at speeds up to 1200
     characters per second, print multiple text sizes and fonts in draft quality
     or letter quality under software  control,  and print high resolution color
     graphics.  
<PAGE>

     Magnetic head products are divided into three  categories:  magnetic stripe
     card readers,  check  readers,  and airline  ticket/boarding  pass readers.
     Applications include banking transactions,  point-of-sale transactions, and
     airline ticketing.

     The Company also sells replacement printheads and utilizes its expertise in
     printhead  design and  manufacturing  to support its  printhead  repair and
     replacement operations.

    Transaction Printers

     The Company's  transaction  printers  utilize  impact and thermal  printing
     technology and consist of four product  families:  impact printers,  impact
     printing mechanisms,  thermal printers,  and related supplies and services.
     Applications  for these  products  include  bank teller  transactions,  ATM
     receipts  and  statement  printing,  point-of-sale  receipts,  money  order
     printing,  weigh/scale  printing,  lottery tickets,  and wagering slips for
     race tracks.

     Bar Code Products

     The Company's bar code products utilize direct thermal,  thermal  transfer,
     and laser  printing  technology in a full range of product  families  which
     include  desktop  printers,   portable   printers,   industrial   printers,
     continuous-feed laser printers,  print and apply products for wholesale and
     industrial  use, and related  supplies and  services,  such as software and
     ribbons.  In addition,  the Company  supplies a full range of stock and bar
     code labels as well as custom label products.

     The Company's  thermal bar-code printer products include a thermal transfer
     printer designed for industrial  environments with the need for high volume
     printing,  a family of direct thermal and thermal  transfer compact desktop
     printers  designed  for medium  volume  printer  requirements,  and several
     direct  thermal  and  thermal  transfer   portable  printers  designed  for
     commercial  usage and harsh  environments.  The  Company's  print and apply
     products  automatically  cut and  apply  bar  code  labels  in  high  speed
     packaging environments.

     Industries served include manufacturing,  transportation,  medical, retail,
     and distribution.  Typical applications include hospital and pharmaceutical
     management,   work  order   tracking,   shipping  and  receiving,   product
     identification, shelf labeling, pricing labels, and inventory control.

Marketing and Customers

The Company  markets its impact  printheads  and  magnetic  heads  directly to a
well-defined group of original equipment manufacturers ("OEMs") of data and word
processing  printers and  transaction  printing  devices.  Most of the Company's
impact  printhead  customers  rely on the  Company  as their  primary  source of
supply.  The  magnetic  head  business  shares its  market  with  several  other
suppliers.

The Company's  transaction printers are used to print various types of hard copy
output where custom features,  reliability,  durability, speed, ease of use, and
cost are important  factors.  The markets and applications for these transaction
printer products are diverse and widespread.

The Company's transaction printers are sold to OEMs,  distributors,  value-added
resellers,  and end users. The Company believes many of its transaction  printer
customers  rely on the Company as their sole source  supplier  but could  modify
their systems to utilize competitive products.

The Company's bar code products are primarily  utilized in commercial and retail
environments to print labels and bar codes. These products are sold primarily to
distributors  and value added  resellers  who add value via software or service.
The Company also sells these products directly to end users who are implementing
new,  expansion,  or  replacement  bar coding  systems.  The Company's  labeling
products  and  marking  solutions  are sold to end users  through a sales  force
located in seven states.
<PAGE>

Marketing  efforts include  advertisements  in a number of trade journals,  news
releases  covering new products,  and  participation  in most of the significant
industry trade shows in the United States and Europe.

As of December 31, 1996,  domestic and  international  sales were  conducted via
direct sales offices, distributors and agents.

In  1996,  First  Data  Corporation  accounted  for  13% of  total  revenue,  or
$15,042,000;  and no  customer  accounted  for more  than  10% of the  Company's
revenues in 1995 or 1994.

Export revenues for the Company's North American  operations,  shipped primarily
to Europe, were approximately 9%, 10%, and 11%, of total revenues in 1996, 1995,
and 1994,  respectively.  Total foreign sales were $34,857,000 or 30% of revenue
in 1996,  $31,272,000  or 32% of  revenue  in 1995,  and  $24,006,000  or 31% of
revenue in 1994.

The Company's foreign sales are made directly by the Company and by distributors
and agents and are subject to certain risks common to all export activities such
as governmental  regulation and the risk of imposition of tariffs or other trade
barriers. In addition, a majority of the Company's foreign sales are denominated
in local currencies and, thus, are subject to the risk of currency fluctuations.
The Company reviews  potential foreign currency risks on an ongoing basis and to
date has been able to  effectively  manage this risk  through  natural  currency
offsets.

Backlog

Most customers  purchase  products from the Company under  purchase  orders that
specify prices for particular  quantities and anticipated  release dates ranging
up to 10 months. The total backlog under such purchase orders was $18,025,174 as
of March 3, 1997, compared to $33,455,000 as of March 4, 1996. The decrease from
1996 to 1997 is  primarily  due to a decline  in sales in 1997 to the  Company's
principal  customer for 1996.  The  Company's  backlog is  generally  subject to
cancellation  or  rescheduling by the customer on short notice with little or no
penalty.  Accordingly,  the Company's  backlog as of any particular date may not
necessarily be indicative of actual sales for any future period.

Manufacturing and Suppliers

The Company manufactures substantially all of its impact printheads and magnetic
heads in Tijuana,  Mexico,  and manufactures  prototypes and conducts pilot runs
for  printheads  at its  headquarters  in San  Diego,  California.  The  Company
manufactures its transaction  printers and mechanisms in Riverton,  Wyoming, its
bar code  products in Paso  Robles,  California;  and its labels and supplies in
Denver,  Colorado.  The Company also manufactures impact and thermal printers in
Manchester,   England.  Foreign  manufacturing  is  subject  to  certain  risks,
including transportation delays and interruptions, the imposition of tariffs and
export controls, and changes in governmental policies.

The Company  manufactures  its  products in high volume and to exacting  quality
standards.  Accordingly,  the Company  maintains an extensive  quality assurance
program,  including  precision  computerized final testing of all printheads and
extensive burn-in testing for its bar code products,  transaction printers,  and
mechanisms.

Component  parts used in the assembly of the Company's  products,  most of which
use tooling  designed and owned by the Company,  are  purchased  primarily  from
suppliers in the United States,  the Far East, and Europe.  Although the Company
has more than one vendor available for most parts, some parts are available only
from a sole source.  An  interruption  in supply from any of the Company's  sole
source suppliers could temporarily result in the Company's  inability to deliver
the affected  products on a timely basis,  which in turn could adversely  affect
the Company's results of operations.  Additionally,  the Company will often rely
on a sole source for some parts following the introduction of a new product.  If
the product is well accepted in the market,  the Company will qualify additional
sources.

The Company provides product warranties ranging from 90 days to one year.

Patents and Licenses

The  Company  holds  various  U.S.  and  foreign  patents on impact  printheads,
transaction  printers,  magnetic  card  readers,  and bar code  products and has
applied for additional  domestic and foreign  patents.  The basic technology for
the Company's  printhead  products is based upon these patents and manufacturing
expertise.
<PAGE>

There can be no assurance  that any issued patents will provide the Company with
competitive  advantages or will not be challenged by third parties,  or that the
patents or other will not have an adverse effect on the Company's  ability to do
business,  or that  others  will not  independently  develop  similar  products,
duplicate the  Company's  products,  or design around the patents  issued to the
Company.

Competition

One domestic and one foreign  printhead  manufacturer  compete directly with the
Company in the high  performance  segment of the impact  printhead  market,  and
additional companies  manufacture impact printheads for the intermediate and low
performance  portions of the market.  Additionally,  some printer  manufacturers
sell  printheads in  competition  with the Company.  The  principal  competitive
factors in the printhead business are technological expertise and the ability to
deliver  reliable and  cost-effective  products on a timely  basis.  The Company
believes that it successfully competes on each of these bases.

There are  numerous  small and large  competitors  in the  transaction  printing
market. Large,  typically Japanese,  manufacturers dominate the lower end of the
market.  The Company has been successful in the intermediate to high-end portion
of that  market due to the  Company's  ability  to provide  application-specific
products for its customers within relatively short lead times.

There are numerous  competitors in the printing  segment of the bar code market.
In addition, the Company expects competition to increase in this market over the
next several years.  The Company believes its ability to utilize a full range of
technology and products gives the Company a reasonably  competitive  position in
relation to many of its competitors in meeting the needs of its customers.

Product Development

The Company is a leader in the  development of both impact  printing and thermal
printing technology.  The Company's product development  activities are targeted
at both  existing  and new  applications.  A variety of  engineering  skills are
required in the development of the Company's products, and the Company maintains
expertise  in  mechanical,   electrical,   firmware,  and  software  engineering
disciplines.  As of March 3, 1997, the Company employed 62 individuals dedicated
to research and development.

In  1996,  1995,  and  1994,  the  Company  spent  $5,805,000,  $5,007,000,  and
$4,685,000, respectively, for research and development.

Employees

As of  March  3,  1997,  the  Company  and its  subsidiaries  had 925  full-time
employees. No employee is covered by a collective bargaining agreement,  and the
Company considers its employee relations to be good.

Executive Officers of the Registrant

Information regarding the Company's Executive Officers is as follows:

     Mr. William H. Gibbs, 53, President,  Chief Executive Officer, and Chairman
     of the Company, joined the Company in November 1985.

     Mr. Walter S. Sobon,  48, Chief  Financial  Officer,  joined the Company in
     March 1997.  From November 1995 to march 1997 Mr. Sobon was an  Independent
     Management Consultant.  From October 1989 to November 1995 Mr. Sobon served
     as the  Senior  Vice  President,  Chief  Financial  Officer  and  Corporate
     Secretary of VWR Scientific  Products  Corporation,  a laboratory  products
     company.

     Mr. David T. Ledwell, 50, Executive Vice President,  Transaction  Products,
     joined the Company in March 1986.

     Ms. Janet W. Shanks, 37, Chief Accounting  Officer,  Corporate  Controller,
     and Secretary, joined the Company in October 1986.
<PAGE>

Certain Factors That May Affect Future Results

The risk  factors  set forth  below and  elsewhere  under  this Item 1 under the
captions "Marketing and Customers,  " "Backlog,  " "Manufacturing and Supplies,"
"Patents and Licenses," and  "Competition" are important factors that may affect
future  results and that could cause actual  results to differ  materially  from
those  projected in  forward-looking  statements that may be made by the Company
from time to time.

Future  Operating  Results  Subject to  Fluctuation  -- The Company's  operating
results  may  fluctuate  in the  future  as a  result  of a number  of  factors,
including  the timing of  customer  orders,  timing of  completion  of  existing
customer  contracts,  variations in the Company's  sales  channels or the mix of
products  it sells,  changes in pricing  policies  by the  Company's  suppliers,
fluctuations  in  manufacturing  yields,  market  acceptance of new and enhanced
versions  of the  Company's  products  and the timing of  acquisitions  of other
businesses, products and technologies and any associated charges to earnings.

The Company  anticipates  that net sales and results of operations for the first
quarter of 1997 will be significantly  below the  corresponding  results for the
first quarter of 1996 due to delays in orders from some major customers and to a
decline in sales in 1997 to the  Company's  principal  customer for 1996. To the
extent that sales to this or other  customers  decline and are not replaced with
business  from other  customers,  the Company's  results of  operations  will be
adversely affected.

In addition,  the Company is continually  evaluating the possible  impairment of
goodwill to determine  whether events or changes in circumstances  indicate that
the carrying amount of goodwill may not be recoverable.

Further,  the  Company's  expense  levels are based in part on  expectations  of
future revenues.  The Company has established a program to decrease  expenses in
light of the  anticipated  reduction in revenue  discussed  above.  However,  if
anticipated  sales and  shipments  in any  quarter do not occur  when  expected,
operating expenses and inventory levels could be disproportionately high and the
Company's  operating  results  for that  quarter,  and  potentially  for  future
quarters,  would be adversely  affected.  The Company's  operating results could
also be affected  by general  economic  conditions.  Fluctuations  in  operating
results  are likely to cause  volatility  in the price of the  Company's  Common
Stock.

Management of Acquisitions --  Historically,  the Company has achieved a portion
of its  growth  through  acquisitions  of  other  businesses,  and  the  Company
continues  to pursue  additional  acquisitions  as part of its growth  strategy.
There are a number  of risks  associated  with any  acquisition,  including  the
substantial  time and  attention  required  from  management  of the  Company in
connection  with such  transactions,  the  difficulty of predicting  whether the
operations  will  perform  as  expected  and other  problems  inherent  with any
transition of one business organization into another.  There can be no assurance
that the anticipated  benefits of any acquisition will be realized. A failure by
the Company to manage any such  acquisitions  effectively  could  materially and
adversely  affect the Company's  business and operating  results.  Additionally,
future  acquisitions  could result in potentially  dilutive  issuances of equity
securities,  the incurrence of debt and contingent  liabilities and amortization
expenses  related to goodwill and other  intangible  assets,  any of which could
materially  adversely  affect the  Company's  operating  results  and  financial
condition.

Technological Change; Competition; Dependence on New Products -- The markets for
some of the  Company's  products  are  characterized  by  frequent  new  product
introductions and declining average selling prices over product life cycles. The
Company's  future  success is highly  dependent  upon the timely  completion and
introduction  of  new  products  at  competitive  price/performance  levels.  In
addition,  the Company  must respond to current  competitors,  who may choose to
increase their presence in the Company's  markets,  and to new competitors,  who
may choose to enter  those  markets.  If the  Company  is unable to make  timely
introduction of new products or respond to competitive threats, its business and
operating results could be materially adversely affected.
<PAGE>

Fluctuation  in  Demand  -- The  Company's  customers  encounter  uncertain  and
changing  demand for their  products.  They  typically  order  products from the
Company based on their forecasts. If demand falls below customers' forecasts, or
if customers do not control their  inventories  effectively,  they may cancel or
reschedule shipments previously ordered from the Company. The Company has in the
past  experienced,  and may at any time and with  minimal  notice in the  future
experience,  cancellations and postponements of orders. The Company  anticipates
that  first  quarter  1997  results  will be below  last  year's  level due to a
reduction in orders from some major customers.
<TABLE>

ITEM 2.    PROPERTIES
<CAPTION>

The following table outlines the current property leases held by the Company:

---------------------------- --------------------------------------------- ------------------ ------------ ---------------
LOCATION                     PURPOSE                                            SQUARE          ANNUAL      EXPIRE DATE
                                                                                FOOTAGE          COST
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
<S>                          <C>                                              <C>              <C>           <C> 
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
San Diego, California        administration,    marketing,   engineering,     17,700 sq. ft    $206,000      June 2001
                             pilot production operations, refurbishment
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
San Diego, California        executive offices                                  4,800 sq. ft     $48,000     June 1997

---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
Riverton, Wyoming            manufacturing,    engineering,    marketing,     40,000 sq. ft    $100,000      March 2002
                             administration
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
Paso Robles, California      manufacturing,    engineering,    marketing,      45,000 sq. ft   $134,000      Sept. 1997
                             administration
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
Denver, Colorado             administration, marketing, manufacturing         23,500 sq. ft    $190,000      Feb. 2004

---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
Tijuana, Mexico              manufacturing                                    30,000 sq. ft    $103,000    Month to Month

---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
Tijuana, Mexico              manufacturing                                    10,900 sq. ft     $40,000      March 1999

---------------------------- --------------------------------------------- ------------------ ------------ ---------------
---------------------------- --------------------------------------------- ------------------ ------------ ---------------
Sydney, Australia            marketing, administration, technical support       8,600 sq. ft     $39,000     June 1998

---------------------------- --------------------------------------------- ------------------ ------------ ---------------
</TABLE>

The Company owns a 12,000 square foot building in  Manchester,  England in which
its  DH  Technology,  plc  subsidiary  performs  manufacturing,  marketing,  and
administration.

The Company  believes that its existing  facilities  are generally  suitable and
adequate for its  businesses.  The Company has generally  been able to renew its
manufacturing and office facilities leases as they expire at then current market
rates.  Management believes that renewal of existing leases at market rates will
not have a significant impact on operating expenses or cash flow.

ITEM 3.    LEGAL PROCEEDINGS

There are no pending legal  proceedings,  other than ordinary routine litigation
incidental to the business which is not considered to be material,  to which the
registrant  or any of its  subsidiaries  is a party  or to  which  any of  their
property is subject.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.
<PAGE>

                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information regarding "Market for the Registrant's Common Equity and Related
Stockholder  Matters" is  incorporated by reference to the Company's 1996 Annual
Report to Shareholders, where such information appears under the caption "Common
Stock  Information" on page 26 of such report. An excerpt from the Annual Report
to the Shareholders  containing this information has been filed as Exhibit 13 to
this Annual Report on Form 10-K.

ITEM 6.    SELECTED FINANCIAL DATA

Selected  financial  data for the Company is  incorporated  by  reference to the
Company's 1996 Annual Report to  Shareholders,  where such  information  appears
under  the  caption  "Selected  Financial  Data" on page 12 of such  report.  An
excerpt from the Annual Report to the  Shareholders  containing this information
has been filed as Exhibit 13 to this Annual Report on Form 10-K.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  
           AND  RESULTS OF OPERATIONS

Information  regarding  "Management's   Discussion  and  Analysis  of  Financial
Condition  and  Results of  Operations"  is  incorporated  by  reference  to the
Company's 1996 Annual Report to  Shareholders,  where such  information  appears
under the caption  "Management's  Discussion and Analysis of Financial Condition
and Results of Operations" on page 13 of such report. An excerpt from the Annual
Report to the Shareholders containing this information has been filed as Exhibit
13 to this Annual Report on Form 10-K.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  consolidated  financial  statements  of the  Company  are  incorporated  by
reference  to the  Company's  1996  Annual  Report to  Shareholders,  where such
information   appears  under  the  captions   "Consolidated   Balance   Sheets,"
"Consolidated  Statements of Income," "Consolidated  Statements of Shareholders'
Equity,"  "Consolidated  Statements  of  Cash  Flows,"  "Notes  to  Consolidated
Financial Statements," and "Independent Auditors' Report" on pages 16 through 26
of such report. An excerpt from the Annual Report to the Shareholders containing
this  information  has been filed as Exhibit  13 to this  Annual  Report on Form
10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING  
           AND  FINANCIAL DISCLOSURE

Not applicable.

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General  Instructions  G(3) to Form 10-K, the information  regarding
the  Company's  Directors  is  set  forth  under  "Election  of  Directors"  and
"Compliance  with  Section  16(a)  of the  Securities  Exchange  Act of 1934" in
Registrant's  Definitive  Proxy  Statement  filed  pursuant to Regulation 14A on
March  24,  1997,  which is  incorporated  herein by  reference.  See Item 1 for
information regarding Executive Officers.

ITEM 11.   EXECUTIVE COMPENSATION

Pursuant to General  Instructions G(3) to Form 10-K, the information required by
Item 11 of Form 10-K is incorporated  by reference to the information  contained
in the section  captioned  "Executive  Compensation" in Registrant's  Definitive
Proxy  Statement  filed pursuant to Regulation  14A on March 24, 1997,  which is
incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Pursuant to General  Instruction G(3) to Form 10-K, the information  required by
Item 12 of Form 10-K is incorporated  by reference to the information  contained
in the section captioned  "Security  Ownership of Certain  Beneficial Owners and
Management" in the  Registrant's  Definitive  Proxy  Statement filed pursuant to
Regulation 14A on March 24, 1997 which is incorporated herein by reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.
<PAGE>

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The  following  documents  are filed as part of this  Annual  Report on Form
10-K.

     1. Financial Statements. The following consolidated financial statements of
DH Technology,  Inc. and subsidiaries  and the Independent  Auditors' Report are
incorporated   by  reference  to  the   Registrant's   1996  Annual   Report  to
Shareholders:

   Consolidated Balance Sheets - December 31, 1996 and 1995.
   Consolidated  Statements of Income - Years Ended December 31, 1996, 1995, and
   1994.  Consolidated Statements of Shareholders' Equity - Years Ended December
   31, 1996, 1995, and 1994. Consolidated Statements of Cash Flows - Years Ended
   December 31, 1996, 1995, and 1994. Notes to Consolidated Financial Statements
   Independent Auditors' Report- KPMG Peat Marwick LLP

With the exception of the aforementioned information,  the 1996 Annual Report to
Shareholders  is not to be deemed filed as part of this report unless  otherwise
noted.

     2.  Financial  Statement  Schedules.   The  following  financial  statement
schedules  of DH  Technology,  Inc. and  subsidiaries  are filed as part of this
Annual  Report  on  Form  10-K  and  should  be  read in  conjunction  with  the
consolidated financial statements , and related notes thereto, of DH Technology,
Inc. and subsidiaries.
Schedule                                                                  Page

II  Valuation  and   Qualifying   Accounts..............................   S-1

Schedules not listed above have been omitted  because they are not applicable or
are not required or the information required to be set forth therein is included
in the consolidated financial statements or notes thereto.

     3. Exhibits.  The following  Exhibits are filed as part of, or incorporated
by reference into, this Annual Report on Form 10-K.

   Exhibit                               Description
   Number
 -----------    ----------------------------------------------------------------
     2.1        Stock Purchase Agreement dated February 10, 1994, by and between
                Registrant and All Holders of Stadia Colorado Corp.  Stock,  and
                Charles J. Osborn, by which Registrant purchased Stadia Colorado
                Corp.  (Incorporated by reference to Exhibit 2.1 of Registrant's
                Current Report on Form 8-K dated March 14, 1994.)

     2.2        Stock Purchase  Agreement  dated August 12, 1994, by and between
                Registrant,  Cognitive Solutions,  Inc., and John Bergquist,  by
                which   Registrant   purchased   Cognitive    Solutions,    Inc.
                (Incorporated  by  reference  to  Exhibit  2.1  of  Registrant's
                Current Report on Form 8-K dated September 14, 1994.)

     3.1        Registrant's  Restated Articles of Incorporation.  (Incorporated
                by reference  to Exhibit 3.1 of  Registrant's  Annual  Report on
                Form 10-K for the fiscal year ended December 31, 1988.)
<PAGE>

   Exhibit
    Number                               Description
-------------   ----------------------------------------------------------------
     3.2        Certificate of Amendment of Restated  Articles of  Incorporation
                dated September 22, 1995.  (Incorporated by reference to Exhibit
                3.1(b) of Registrant's Annual Report on Form 10-K for the fiscal
                year ended December 31, 1995.)

     3.3        Registrant's  Bylaws, as amended.  (Incorporated by reference to
                Exhibit 3.2 of  Registrant's  Annual Report on Form 10-K for the
                fiscal year ended December 31, 1993.)

    10.1*       Form of Employment  Agreement  dated  December 3, 1985,  between
                Registrant and William H. Gibbs.  (Incorporated  by reference to
                Exhibit 10.5 of Registrant's  Annual Report on Form 10-K for the
                fiscal year ended December 31, 1985.)

    10.2*       Registrant's  1985  Director  Warrant  Plan and Forms of Warrant
                issued under the Plan, as amended. (Incorporated by reference to
                Exhibit 10.3 of Registrant's  Annual Report on Form 10-K for the
                fiscal year ended December 31, 1991.)

    10.3*       Registrant's  1983  Incentive  Stock  Option  Plan and  Forms of
                Incentive Stock Option Agreement and  Nonstatutory  Stock Option
                Agreement,  as amended.  (Incorporated  by  reference to Exhibit
                10.4 of  Registrant's  Annual Report on Form 10-K for the fiscal
                year ended December 31, 1990.)

    10.4        Lease  Agreement  dated April 20, 1990,  between  Registrant and
                Coast Income  Properties,  Inc.,  as amended.  (Incorporated  by
                reference to Exhibit 10.5 of Registrant's  Annual Report on Form
                10-K for the fiscal year ended December 31, 1992.)

    10.5       Lease  Agreement  dated July 1, 1990,  between DH  Tecnologia de
                Mexico  S.A. de C. V. and Alberto  Lutteroth.  (Incorporated  by
                reference to Exhibit 10.6 of Registrant's  Annual Report on Form
                10-K for the fiscal year ended December 31, 1990.)

    10.6*       Registrant's  1992 Stock Plan and Form of Incentive Stock Option
                Agreement,  as amended.  (Incorporated  by  reference to Exhibit
                10.6 of  Registrant's  Form  10-K  for  the  fiscal  year  ended
                December 31, 1994.)

    10.7        Lease Agreement  dated April 1, 1994, by and between  Registrant
                and  Wind  River   Development   Co.,  a  Wyoming   corporation.
                (Incorporated by reference to Exhibit 10.6 of Registrant's  Form
                10-K for the fiscal year ended December 31, 1994.)

    10.8        Lease Agreement dated February 28, 1994, between Chardan,  Ltd.,
                and Stadia Colorado Corp.  (Incorporated by reference to Exhibit
                2.2 of  Registrant's  Current Report on Form 8-K dated March 14,
                1994.)

    10.9        Sublease  Agreement  dated  September  30, 1992,  by and between
                Medical Engineering  Corporation and Cognitive  Solutions,  Inc.
                (Incorporated by reference to Exhibit 10.6 of Registrant's  Form
                10-K for the fiscal year ended December 31, 1994.)

    10.10       Line of Credit Agreement dated August 15, 1994 by and between DH
                Technology,   Inc.  and  Wells  Fargo  Bank.   (Incorporated  by
                reference  to Exhibit  10.10 on Form 10Q for the  Quarter  Ended
                March 31, 1995.)

     11         Computation of Net Income Per Share.

     13         Registrant's  1996  Annual  Report  to  Shareholders,  pages  12
                through 27.

     21         List of Subsidiaries.

    23.1        Independent Auditors' Consent and Report on Schedules.
------------------------
* Management contract or compensatory plan or arrangement.


     (b)  Form 8-K Reports:

          No  current  report on Form 8-K was filed  during  the  quarter  ended
December 31, 1996.



<PAGE>



                                   SIGNATURES

Pursuant to the  requirements  of Sections 13 or 15(d) of the  Securities Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                AXIOHM TRANSACTION SOLUTIONS, INC.   
                                (formerly named DH TECHNOLOGY, INC.)

                                By:      /s/ Janet W. Shanks
                                ----------------------------
                                  Janet W. Shanks
                                  Chief Accounting Officer,
                                  Corporate Controller, and Secretary

Date: February 13, 1998
                                



<PAGE>

<TABLE>

                                                   S - 1
                                    DH TECHNOLOGY, INC. AND SUBSIDIARIES
                                                SCHEDULE II
                                     VALUATION AND QUALIFYING ACCOUNTS
                                     Fiscal Years 1996, 1995, and 1994
                                           (Amounts in Thousands)
<CAPTION>


                       Balance at      Charge to       Charge to                         Balance at
                       Beginning of     Cost and     Other Accounts     Recoveries/    End of Period
Description               Period         Expense           (1)         (Deductions)
-----------               ------         -------           ---         ------------    -------------

Allowance for
Doubtful Accounts
<S>                      <C>               <C>             <C>            <C>              <C>

1996                     $1,067            $87             --             $43              $1,197
1995                      1,003             75             --             (11)              1,067
1994                        979            105             58            (139)              1,003


--------------------

(1) Recorded upon acquisition.

</TABLE>

<PAGE>


<TABLE>




                                                     EXHIBIT 11

                                        DH TECHNOLOGY, INC. AND SUBSIDIARIES
                                        Computation of Net Income Per Share
                                       (In thousands, except per share data)

<CAPTION>

                                                         THREE MONTHS                         TWELVE MONTHS
                                                             ENDED                                ENDED
                                                          DECEMBER 31                          DECEMBER 31

                                                 ------------    -------------       --------------    ------------
                                                 ------------------------------      --------------------------------
                                                      1996             1995                1996             1995
                                                 ------------------------------      --------------------------------
<S>                                                    <C>              <C>                  <C>             <C>   

Primary and fully diluted:*

Average shares outstanding                             7,974            7,880                7,890           7,809

Net effect of dilutive stock
options and warrants based on
the treasury stock method using
average market price                                     398              511                  461             528
                                                 ------------    -------------       --------------    ------------

Average common and common
equivalent shares outstanding                          8,372            8,391                8,351           8,337

Net income                                            $3,322           $2,783              $13,027         $10,301

Per share (primary and fully diluted)
Net income per share                                    $.40             $.33                $1.56           $1.24
                                                 ------------    -------------       --------------    ------------
                                                 ------------    -------------       --------------    ------------



</TABLE>

<PAGE>






<PAGE>
<TABLE>
<CAPTION>
                                                                    EXHIBIT 13


Selected Financial Data
Years ended December 31,           1996     1995     1994     1993     1992     1991      1990     1989    1988     1987
(In thousands, except per
 share data)

Income Statement Data
<S>                             <C>       <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Revenue:
         Net sales ...........  $115,784  $98,855  $77,918  $56,351  $54,081  $46,288  $40,038  $41,619  $29,109  $15,763
         License fees and
             royalties .......      --       --       --       --         89      258    1,089      436      251      695
                                  -----     -----    -----    -----    -----     ----     ----    -----      ---      ---      
Total revenue ................   115,784   98,855   77,918   56,351   54,170   46,546   41,127   42,055   29,360   16,458
Costs and expenses:
         Cost of net sales ...    74,847   63,267   48,972   34,870   33,770   28,526   24,521   26,527   20,025   10,152
         Selling, general and
             administrative ..    15,997   15,383   12,769    8,955    8,599    8,078    5,523    5,297    4,113    2,378
         Research and
                  development      5,805    5,007    4,685    4,170    4,150    3,744    2,845    2,259    1,450      683
                                   -----    -----    -----    -----    -----    -----    -----    -----    -----      ---
Total costs and expenses .....    96,649   83,657   66,426   47,995   46,519   40,348   32,889   34,083   25,588   13,213
                                  ------   ------   ------   ------   ------   ------   ------   ------   ------   ------
Income from operations .......    19,135   15,198   11,492    8,356    7,651    6,198    8,238    7,972    3,772    3,245
Interest income, net .........     1,342      955      644      692      391      584      921      560      174      354
                                   -----      ---      ---      ---      ---      ---      ---      ---      ---      ---
Income before income taxes ...    20,477   16,153   12,136    9,048    8,042    6,782    9,159    8,532    3,946    3,599
Income taxes .................     7,450    5,852    4,078    2,717    2,252    2,144    3,192    2,640      816      765
                                   -----    -----    -----    -----    -----    -----    -----    -----      ---      ---
Net income ...................   $13,027  $10,301   $8,058   $6,331   $5,790   $4,638   $5,967   $5,892   $3,130   $2,834
                                 -------  -------   ------   ------   ------   ------   ------   ------   ------   ------
Net income per share .........     $1.56    $1.24    $1.00    $0.82    $0.75    $0.62    $0.79    $0.79    $0.43    $0.38
                                   -----    -----    -----    -----    -----    -----    -----    -----    -----    -----
Shares used in
         per share calculation     8,351    8,337    8,076    7,731    7,749    7,481    7,529    7,494    7,260    7,383
                                   -----    -----    -----    -----    -----    -----    -----    -----    -----    -----

Years ended December 31,            1996     1995     1994     1993     1992     1991     1990     1989     1988     1987

(In thousands)
Balance Sheet Data
Working capital ..............   $62,029  $48,664  $37,191  $41,406  $34,771  $27,679  $24,712  $21,077  $15,083  $10,400
Total assets .................    97,105   85,285   71,306   55,975   47,937   44,113   35,713   32,565   24,709   15,065
Long-term debt ...............     2,212    3,095    4,355    1,580    2,358    3,687    3,109    4,016    4,865       73
Shareholders' equity .........    82,252   67,480   55,848   46,732   39,902   33,531   27,904   22,176   15,914   12,692
                                  ------   ------   ------   ------   ------   ------   ------   ------   ------   ------

The  selected  financial  data  should  be read  with the  related  consolidated
financial statements and notes thereto, included herein.
</TABLE>
<PAGE>

Management's Discussion and Analysis

The following  discussion and analysis  should be read in  conjunction with the
Company's consolidated financial statements and the notes related thereto.

Results of Operations
Operating Percentages                    1996     1995     1994
                                         ----     ----     ----
Net sales ..........................     100.0%   100.0%   100.0%
Cost of net sales ..................      64.6%    64.0%    62.9%
Selling, general, and administrative      13.8%    15.6%    16.4%
Research and development ...........       5.0%     5.1%     6.0%
Income from operations .............      16.5%    15.4%    14.7%
Income before income taxes .........      17.7%    16.3%    15.6%
Income taxes .......................       6.4%     5.9%     5.2%
Net income .........................      11.3%    10.4%    10.3%

The  consolidated  financial  statements of DH Technology,  Inc. (the "Company")
represent  the financial  results of DH  Technology,  Inc. and its  consolidated
subsidiaries,  Stadia  Colorado  Corp.  ("Stadia");  Cognitive  Solutions,  Inc.
("Cognitive");  DH Tecnologia de Mexico, S.A. de C.V.; DH Technology plc; and DH
Technology pty. Results of operations  subsequent to February 28, 1994,  reflect
the added results of Stadia, and results for Cognitive are included after August
31, 1994. Also,  results of operations  subsequent to October 30, 1995,  reflect
the  added  results  of Mos  Magnetics.  See Note 10 of  Notes  to  Consolidated
Financial Statements.

1996 Compared to 1995

In 1996, net sales grew to $115.8 million,  a 17.1% increase over 1995 net sales
of $98.9  million.  This growth was  primarily  attributable  to increased  unit
shipments of  transaction  printers in 1996. A  significant  percentage  of this
growth was attributable to a single customer.  The Company expects that sales to
this customer will decrease  significantly  in 1997 as a substantial  portion of
the business was  fulfilled  in 1996.  Due to the expected  decrease in sales to
this customer and to delays in orders from certain other customers,  the Company
expects that net sales,  and,  accordingly,  the results of  operations  for the
first quarter of 1997 will be significantly below the corresponding  amounts for
the  first  quarter  of  1996.  See  "Certain  Factors  That May  Affect  Future
Results-Future Operating Results Subject to Fluctuation."

Cost of net sales increased slightly to 64.6% of net sales in 1996 from 64.0% in
1995.  Two factors  primarily  contributed  to the increase:  a mix shift in the
printhead  business to products with higher material  content as a percentage of
net sales,  and a price decrease for Cognitive's  barcode printers in 1996 which
was not completely offset by cost reductions.

Selling,  general,  and  administrative  expenses as a  percentage  of net sales
decreased to 13.8% in 1996 compared to 15.6% in 1995 due to net sales increasing
at a faster  rate than these  expenses.  These  expenses  increased  in absolute
dollars  to $16.0  million  in 1996  compared  to $15.4  million  in 1995.  This
increase  was  primarily  due  to  the  inclusion  of  selling,   general,   and
administrative  expenses  for the  Magnetics  division  for all of 1996,  and an
increase in costs related to the  implementation  of a new worldwide MIS system,
partially  offset by the effect of a foreign exchange gain realized when foreign
subsidiaries reduced intercompany obligations.

Research and development  expenses remained  relatively  constant at 5.0% of net
sales in 1996 compared to 5.1% in 1995. Total research and development  expenses
increased  to $5.8  million  in 1996  from $5.0  million  in 1995.  The  Company
believes that the continued timely  development of new products and enhancements
to its existing products are essential to maintaining its competitive  position.
Accordingly,  the  Company  anticipates  that such  expenses  will  continue  to
increase in absolute dollars.
<PAGE>

Income from  operations as a percentage of net sales  increased to 16.5% in 1996
from 15.4% in 1995 primarily due to lower operating  expenses as a percentage of
revenue as discussed above.

Interest  income  increased to $1,491,000 in 1996 compared to $1,231,000 in 1995
as a result of higher interest-bearing cash balances in 1996.

Interest expense  decreased to $149,000 in 1996 from $276,000 in 1995 due to the
payment of debt related to the Cognitive and Stadia acquisitions.  See Note 6 of
Notes to Consolidated Financial Statements.


Income taxes as a percentage of income before taxes  increased to 36.4% for 1996
from 36.2% for 1995,  principally  due to the reduced  benefits from the federal
research  and  development  tax  credit.  See Note 12 of  Notes to  Consolidated
Financial Statements.

1995 Compared to 1994

In 1995, net sales grew to $98.9  million,  a 27.0% increase over 1994 net sales
of $77.9 million. Approximately two-thirds of this increase was due to increased
unit  shipments  of  specialty  printers  and  printer   components,   including
printheads.  The remainder of the increase was  attributable to the inclusion of
results of Cognitive, and to a lesser extent Stadia, for an entire twelve months
in 1995.

Cost of net sales  increased to 64.0% of net sales in 1995  compared to 62.9% in
1994. Three factors contributed  approximately  equally to the increase.  First,
the results of Cognitive,  whose  products have slightly  lower margins than the
Company's  historical average,  were included for all of 1995. Second,  start-up
costs  associated with the  introduction of two new printer products in 1995 and
higher  component and expediting costs caused by integrated  circuits  shortages
contributed to lower consolidated  margins.  Third, in 1995 the Company filled a
sizable order for low-end transaction  printers with gross margins  considerably
lower than the historical average for the Company.

Selling,  general,  and  administrative  expenses as a  percentage  of net sales
decreased to 15.6% in 1995 compared to 16.4% in 1994 due to consolidated revenue
increasing  at  a  faster  rate  than   consolidated   selling,   general,   and
administrative  expenses.  These expenses increased in absolute dollars to $15.4
million in 1995 compared to $12.8  million in 1994.  This increase was primarily
attributable  to the  inclusion of results for Stadia and  Cognitive  for all of
1995.

Research and  development  expenses  decreased to 5.1% of net sales in 1995 from
6.0% in 1994 due to  consolidated  revenues  increasing  at a faster  rate  than
consolidated  research and  development  expenses.  Total  dollars  expended for
research and development  increased to $5.0 million in 1995 from $4.7 million in
1994. The Company believes that the continued timely development of new products
and enhancements
to its existing products are essential to maintaining its competitive position.

Income from  operations as a percentage of net sales  increased to 15.4% in 1995
from 14.7% in 1994 primarily due to lower operating  expenses as a percentage of
revenue as discussed above.
<PAGE>

Interest income  increased to $1,231,000 in 1995 compared to $854,000 in 1994 as
a result of higher cash balances and higher interest rates in 1995.

Interest  expense  increased  to $276,000  in 1995 from  $210,000 in 1994 due to
interest  expense  associated  with debt  incurred as a result of the Stadia and
Cognitive   acquisitions.   See  Note  6  of  Notes  to  Consolidated  Financial
Statements.

Income taxes as a percentage of income before taxes  increased to 36.2% for 1995
from  33.6% for 1994,  principally  due to  reduced  benefits  from the  federal
research  and  development  tax  credit.  See Note 12 of  Notes to  Consolidated
Financial Statements.

Certain Factors That May Affect Future Results

The Company's  representatives  may from time to time make oral  forward-looking
statements. The factors set forth below are certain important factors that could
affect future  operating  results or cause actual  results to differ  materially
from those projected in any such forward-looking statements.

Future  Operating  Results  Subject to  Fluctuation  -- The Company's  operating
results  may  fluctuate  in the  future  as a  result  of a number  of  factors,
including  the timing of  customer  orders,  timing of  completion  of  existing
customer  contracts,  variations in the Company's  sales  channels or the mix of
products  it sells,  changes in pricing  policies  by the  Company's  suppliers,
fluctuations  in  manufacturing  yields,  market  acceptance of new and enhanced
versions  of the  Company's  products  and the timing of  acquisitions  of other
businesses, products and technologies and any associated charges to earnings.

The Company  anticipates  that net sales and results of operations for the first
quarter of 1997 will be significantly  below the  corresponding  results for the
first quarter of 1996 due to delays in orders from some major customers and to a
decline in sales in 1997 to the  Company's  principal  customer for 1996. To the
extent that sales to this or other  customers  decline and are not replaced with
business  from other  customers,  the Company's  results of  operations  will be
adversely affected.

In addition,  the Company is continually  evaluating the possible  impairment of
goodwill to determine  whether events or changes in circumstances  indicate that
the carrying amount of goodwill may not be recoverable.

Further,  the  Company's  expense  levels are based in part on  expectations  of
future revenues.  The Company has established a program to decrease  expenses in
light of the  anticipated  reduction in revenue  discussed  above.  However,  if
anticipated  sales and  shipments  in any  quarter do not occur  when  expected,
operating expenses and inventory levels could be disproportionately high and the
Company's  operating  results  for that  quarter,  and  potentially  for  future
quarters,  would be adversely  affected.  The Company's  operating results could
also be affected  by general  economic  conditions.  Fluctuations  in  operating
results  are likely to cause  volatility  in the price of the  Company's  Common
Stock.

Management of Acquisitions --  Historically,  the Company has achieved a portion
of its growth through  acquisitions of other  businesses and continues to pursue
additional  acquisitions as part of its growth  strategy.  There are a number of
risks  associated  with any  acquisition,  including  the  substantial  time and
attention  required  from  management  of the  Company in  connection  with such
transactions,  the difficulty of predicting  whether the operations will perform
as expected and other  problems  inherent  with any  transition  of one business
organization  into  another.  There  can be no  assurance  that the  anticipated
benefits of any acquisition will be realized. A failure by the Company to manage
any such  acquisitions  effectively  could  materially and adversely  affect the
Company's  business and operating  results.  Additionally,  future  acquisitions
could  result  in  potentially  dilutive  issuances  of equity  securities,  the
incurrence of debt and contingent  liabilities and amortization expenses related
to goodwill and other intangible assets, any of which could materially adversely
affect the Company's operating results and financial condition.
<PAGE>

Technological Change; Competition; Dependence on New Products -- The markets for
some of the  Company's  products  are  characterized  by  frequent  new  product
introductions and declining average selling prices over product life cycles. The
Company's  future  success is highly  dependent  upon the timely  completion and
introduction  of  new  products  at  competitive  price/performance  levels.  In
addition,  the Company  must respond to current  competitors,  who may choose to
increase their presence in the Company's  markets,  and to new competitors,  who
may choose to enter  those  markets.  If the  Company  is unable to make  timely
introduction of new products or respond to competitive threats, its business and
operating results could be materially adversely affected.

Fluctuation  in  Demand  -- The  Company's  customers  encounter  uncertain  and
changing  demand for their  products.  They  typically  order  products from the
Company based on their forecasts. If demand falls below customers' forecasts, or
if customers do not control their  inventories  effectively,  they may cancel or
reschedule shipments previously ordered from the Company. The Company has in the
past  experienced,  and may at any time and with  minimal  notice in the  future
experience,  cancellations and postponements of orders. The Company  anticipates
that  first  quarter  1997  results  will be below  last  year's  level due to a
reduction in orders from some major customers.

Liquidity and Capital Resources

Throughout  1996,  the  Company  continued  to  maintain  its  strong  financial
condition.  The  Company's  primary  source  of  liquidity  has been  cash  flow
generated from operations.  Cash, cash  equivalents,  and short-term  investment
securities totaled approximately $44.8 million on December 31, 1996, compared to
$31.7 million on December 31, 1995.

Operating Activities

In 1996,  the Company  generated  approximately  $17.2  million in net cash from
operating  activities  primarily as a result of $13.0  million in net income and
$3.8 million in depreciation and amortization.

Investing Activities

The Company's  principal investing activity in 1996 was the purchase of property
and  equipment  for  product  development  and  production,  the  purchase  of a
worldwide  MIS system,  and the  investment  in  short-term  securities  held to
maturity. The average life of securities held has been extended to secure higher
returns.  As of December 31, 1996, the Company had no material  commitments  for
capital  expenditures.  However, the Company anticipates capital expenditures of
$3 to $4 million in 1997,  principally for new product tooling and manufacturing
equipment.

The Company is required to make additional payments,  not to exceed an aggregate
of $3 million,  to the former shareholder of Cognitive based upon the attainment
of specified net sales of a particular  Cognitive product line. The Company does
not  expect  the  payments  to be  material  in  1997.  See  Note 10 of Notes to
Consolidated Financial Statements.
<PAGE>

Financing Activities

The Company's major financing activities in 1996 were the principal repayment of
long-term  debt,  including  the notes  payable  associated  with the Stadia and
Cognitive acquisitions. As of December 31, 1996, the Company had $2.2 million in
debt outstanding of which the current portion was approximately  $577,000.  This
long-term   debt  includes   approximately   $1.5  million   payable  in  annual
installments  of  $500,000  each in 1997  through  1999 to the  former  owner of
Cognitive.

On August 15, 1996, the Company renewed a $6.5 million line of credit  agreement
originally  signed on August 15, 1994. The line of credit  includes a subfeature
to issue standby and/or commercial letters of credit not to exceed $1.5 million.
Borrowings  under the line bear  interest at a rate per annum equal to the prime
rate in effect from time to time.  As of December  31,  1996,  no draws had been
made  against  this line of credit.  The  Company is  currently  negotiating  an
additional $15 million no-fee line of credit agreement.

The Company currently expects that current cash balances and cash generated from
operations  will adequately  fund the Company's  anticipated  cash needs for the
next twelve  months.  However,  the  Company  continues  to  evaluate  potential
acquisitions  of  businesses  that  would  complement  the  Company's   existing
businesses and product lines, and any such acquisitions could require the use of
the Company's cash resources and/or additional borrowings.

The Company reviews  potential foreign currency risks on an ongoing basis and to
date has been able to  effectively  manage this risk  without the use of hedging
instruments.  In 1996 a $393,000  net gain was realized as a result of favorable
exchange rates  prevailing when the foreign  subsidiaries  reduced  intercompany
obligations.
<TABLE>
<CAPTION>
<PAGE>

Consolidated Balance Sheets

Years ended December 31,                                                                1996           1995
<S>                                                                                 <C>           <C>  

Assets
Current assets:
         Cash and cash equivalents ...............................................  $30,943,000   $28,971,000
         Short-term investment securities held to maturity (note 2) ..............   13,835,000     2,750,000
         Accounts receivable, net of allowance for doubtful
         accounts of $1,197,000 in 1996 and $1,067,000 in 1995 ...................   16,006,000    15,785,000
         Inventories (note 3) ....................................................   11,582,000    14,382,000
         Deferred tax asset (note 12) ............................................    2,089,000     1,744,000
         Prepaid expenses and other current assets ...............................      792,000       573,000
                           Total current assets ..................................   75,247,000    64,205,000
         Fixed assets, net (notes 4 and 6) .......................................    8,250,000     6,290,000
         Intangible assets, net (note 5) .........................................   12,464,000    13,312,000
         Deferred tax asset (note 12) ............................................      206,000          --
         Other assets ............................................................      938,000     1,478,000
                                                                                        -------     ---------
                           Total assets ..........................................  $97,105,000   $85,285,000
                                                                                    ===========   ===========
Liabilities and Shareholders' Equity
Current liabilities:
         Accounts payable ........................................................   $4,587,000    $6,383,000
         Current portion of long-term debt (note 6) ..............................      577,000       980,000
         Accrued payroll, payroll taxes, and benefits ............................    2,630,000     2,579,000
         Accrued expenses ........................................................    1,963,000     2,045,000
         Income taxes payable (note 12) ..........................................    2,406,000     2,128,000
         Accrued warranty ........................................................      478,000       479,000
         Deferred revenue ........................................................      577,000       947,000
                                                                                        -------       -------
                           Total current liabilities .............................   13,218,000    15,541,000
Long-term debt (note 6) ..........................................................    1,635,000     2,115,000
Deferred tax liability (note 12) .................................................         --         149,000
                             --                                                        --------       -------
                           Total liabilities .....................................   14,853,000    17,805,000
Shareholders' equity (note 8):
         Preferred shares, no par value
                  Authorized: 1,000,000 shares; none issued
         Common shares:
                  Common stock, no par value, authorized:
                           28,500,000 shares; issued and outstanding:
                                    7,974,277 in 1996 and 7,890,090 shares in 1995   13,168,000    12,335,000
                  Foreign currency translation adjustment ........................      393,000      (519,000)
                                                                                        -------      -------- 
                  Retained earnings ..............................................   68,691,000    55,664,000
                                                                                     ----------    ----------
                           Total shareholders' equity ............................   82,252,000    67,480,000
                  Commitments (notes 6, 7, 8, 10, and 11)
                           Total liabilities and shareholders' equity ............  $97,105,000   $85,285,000
                                                                                    ===========   ===========

See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>

Consolidated Statements of Income
    

Years ended December 31,                            1996           1995           1994
                                                    ----           ----           ----
<S>                                             <C>             <C>            <C>  

Net sales ...................................   $115,784,000    $98,855,000    $77,918,000
Costs and expenses:
         Cost of net sales ..................     74,847,000     63,267,000     48,972,000
         Selling, general, and administrative     15,997,000     15,383,000     12,769,000
         Research and development ...........      5,805,000      5,007,000      4,685,000
                                                   ---------      ---------      ---------
Total costs and expenses ....................     96,649,000     83,657,000     66,426,000
Income from operations ......................     19,135,000     15,198,000     11,492,000
                                                  ----------     ----------     ----------
Interest income .............................      1,491,000      1,231,000        854,000
Interest expense ............................       (149,000)      (276,000)      (210,000)
                                                    --------       --------       -------- 
Net interest income .........................      1,342,000        955,000        644,000
                                                   ---------        -------        -------
Income before income taxes ..................     20,477,000     16,153,000     12,136,000
Income taxes (note 12) ......................      7,450,000      5,852,000      4,078,000
                   --                              ---------      ---------      ---------
Net income ..................................    $13,027,000    $10,301,000     $8,058,000
Net income per share ........................          $1.56          $1.24          $1.00
                                                       -----          -----          -----
Shares used in per share calculation ........      8,351,000      8,337,000      8,076,000
</TABLE>
<TABLE>
<CAPTION>

                                                                              
Consolidated Statements of Shareholders' Equity 
                                                   
                                                               Foreign Currency               Total
                                              Common Stock        Translation   Retained   Shareholders'
                                           Shares       Amount     Adjustment   Earnings      Equity
                                           ----------------------------------------------------------
<S>                                      <C>         <C>          <C>         <C>           <C> 

Balance, December 31, 1993 ............  $7,624,384  $10,133,000  $(706,000)  $37,305,000   $46,732,000
Exercise of options and warrants ......     106,777      511,000         --            --       511,000
Tax benefit of stock option exercise ..          --       96,000         --            --        96,000
Foreign currency translation adjustment          --           --    451,000            --       451,000
Net income ............................          --           --         --     8,058,000     8,058,000


Balance, December 31, 1994 ............   7,731,161   10,740,000   (255,000)   45,363,000    55,848,000
Exercise of options and warrants ......     158,929    1,235,000         --            --     1,235,000
Tax benefit of stock option exercise ..          --      360,000         --            --       360,000
Foreign currency translation adjustment          --           --   (264,000)           --      (264,000)
Net income ............................          --           --         --    10,301,000    10,301,000


Balance, December 31, 1995 ............   7,890,090   12,335,000   (519,000)   55,664,000    67,480,000
Exercise of options and warrants ......      84,187      694,000         --            --       694,000
Tax benefit of stock option exercise ..          --      139,000         --            --       139,000
Foreign currency translation adjustment          --           --    912,000            --       912,000
Net income ............................          --           --         --    13,027,000    13,027,000

Balance, December 31, 1996 ............   7,974,277  $13,168,000   $393,000   $68,691,000   $82,252,000

See accompanying notes to consolidated financial statements
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Cash Flows
Years ended December 31,                                                           1996           1995           1994
                                                                                   ----           ----           ----
<S>                                                                              <C>            <C>             <C> 

Cash flows from operating activities:
         Net income ..........................................................   $13,027,000    $10,301,000     $8,058,000
         Adjustments to reconcile net income to
                  net cash provided by operating activities:
                           Depreciation and amortization .....................     3,830,000      3,640,000      2,391,000
                           Provision for loss on accounts receivable .........        87,000         65,000        105,000
                           Undepreciated value of asset disposals ............        42,000         65,000          6,000
                           Provision for deferred income taxes,
                                    excluding effect of acquisitions .........      (700,000)      (658,000)      (429,000)
         Changes  in assets and liabilities, excluding effect of acquisitions:
                           Accounts receivable ...............................      (308,000)    (3,219,000)    (1,997,000)
                           Inventories .......................................     2,800,000     (2,814,000)    (1,651,000)
                           Prepaid expenses and other assets .................       321,000        (17,000)       170,000
                           Accounts payable and accrued expenses .............    (1,878,000)     2,264,000       (891,000)
                           Accrued payroll, payroll taxes, and benefits ......        51,000        431,000        513,000
                           Income taxes payable ..............................       278,000        772,000       (343,000)
                           Accrued warranty ..................................        (1,000)        96,000        (20,000)
                           Deferred revenue ..................................      (370,000)        61,000        696,000
                                                                                    --------         ------        -------
                           Net cash provided by operating activities .........    17,179,000     10,987,000      6,608,000
Cash flows from investing activities:
         Net (increase) decrease in short-term
                  investment securities held to maturity .....................   (11,085,000)     1,550,000      5,420,000
         Payment for acquisition purchases, net of cash acquired .............            --       (753,000)   (12,825,000)
         Capital expenditures ................................................    (4,869,000)    (2,469,000)    (2,293,000)
         Proceeds from sale of assets ........................................            --             --         26,000
                                                                                     -------      ---------         ------
                           Net cash used in investing activities .............   (15,954,000)    (1,672,000)    (9,672,000)
Cash flows from financing activities:
         Principal repayments of long-term debt ..............................      (883,000)    (1,260,000)    (1,482,000)
         Exercise of stock options ...........................................       694,000      1,235,000        511,000
         Tax benefit of stock option exercise ................................       139,000        360,000         96,000
                                                                                     -------        -------         ------
                  Net cash provided by (used in) financing activities ........       (50,000)       335,000       (875,000)
Effect of exchange rate changes on cash ......................................       797,000       (266,000)       365,000
                                                                                     -------       --------        -------
Net increase (decrease) in cash and cash equivalents .........................     1,972,000      9,384,000     (3,574,000)
Cash and cash equivalents at beginning of year ...............................    28,971,000     19,587,000     23,161,000
                                                                                  ----------     ----------     ----------
Cash and cash equivalents at end of year .....................................   $30,943,000    $28,971,000    $19,587,000
                                                                                 ===========    ===========    ===========
Supplemental cash flow disclosures:
         Interest paid on debt ...............................................      $140,000        $93,000       $106,000
                                                                                    --------        -------       --------
         Income taxes paid ...................................................    $6,413,000     $5,738,000     $3,539,000
                                                                                  ----------     ----------     ----------
Supplementary disclosure of noncash investing activity:
         Fair market value of assets acquired ................................  $         --       $815,000    $15,865,000
         Cash paid ...........................................................            --       (753,000)   (12,952,000)
                                                                                     -------       --------    ----------- 
         Liabilities assumed .................................................  $         --        $62,000     $2,913,000
                                                                                  ==========        =======     ==========

See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Description of Business -- DH Technology, Inc. and subsidiaries' (the "Company")
principal business activity involves the design,  manufacture,  and distribution
of transaction  printers and mechanisms,  impact printheads,  bar code printers,
and related  services and  supplies,  such as labels and ribbons.  The Company's
core  technologies  include  thermal,  impact and laser.  Products  are marketed
worldwide by a direct sales force, sales representatives,  value-added resellers
and distributors.  The Company  maintains offices in the United States,  Mexico,
England and Australia.

Principles of Consolidation -- The consolidated financial statements include the
accounts  of DH  Technology,  Inc.  and its  wholly-owned  subsidiaries,  Stadia
Colorado  Corp.;  Cognitive  Solutions,  Inc.; DH Tecnologia de Mexico,  S.A. de
C.V.; DH Technology plc; and DH Technology pty. Results of operations subsequent
to  February  28,  1994,  reflect the added  results of Stadia,  and results for
Cognitive  are  included  after  August  31,  1994 (Note  10).  All  significant
intercompany accounts and transactions have been eliminated.

Net Income Per Share -- Net income per share for the years  ended  December  31,
1996,  1995, and 1994 is computed based on the weighted average number of common
and common  equivalent  shares  outstanding  during each year. Stock options and
warrants that have a dilutive effect are considered common stock equivalents for
purposes  of this  calculation.  Fully  diluted  net  income  per  share  is not
materially different from primary net income per share.

Cash and Cash Equivalents -- The Company considers all highly liquid investments
with a  maturity  of three  months  or less at the time of  purchase  to be cash
equivalents.

Concentration of Credit Risk -- Cash in excess of daily requirements is invested
in short-term investment securities consisting of money market funds,  municipal
bonds,  and  short-term  commercial  investments of companies with strong credit
ratings. These investments typically mature within one year, and therefore, bear
minimal  risk.  To date,  the Company has not incurred  losses  related to these
investments.

Short-Term  Investment  Securities Held to Maturity -- Investment  securities at
December 31, 1996 consist  primarily of U.S.  Municipal Bonds and are classified
as held to maturity.  Management  determines the appropriate  classification  of
securities at the time of purchase.  If management has the intent at the time of
purchase and the Company has the ability to hold securities until maturity, they
are classified as held to maturity.  Investment  securities held to maturity are
stated at cost, adjusted for amortization of premiums and accretion of discounts
over the period to maturity of the related security.

Inventories -- Inventories are stated at the lower of cost (first-in, first-out)
or market.

Foreign  Currency  Translation  -- The  accounts  of  foreign  subsidiaries  and
affiliates are measured using local  currency as the  functional  currency.  For
these  operations,  assets and liabilities  are translated into U.S.  dollars at
period-end  exchange  rates,  and income and expense  accounts are translated at
average monthly exchange rates. Net exchange gains or losses resulting from such
translation are excluded from net income and accumulated in a separate component
of  shareholders'  equity.  Financial  results  of  non-U.S.   subsidiaries  and
affiliates in countries with highly inflationary  economies are translated using
a  combination  of current and  historical  exchange  rates and any  translation
adjustments are included in net earnings,  along with all transaction  gains and
losses for the period.  Gains and losses from foreign currency  transactions are
not  significant  and are  included  in  selling,  general,  and  administrative
expenses in the accompanying consolidated statements of income.
<PAGE>

Fixed Assets,  Depreciation,  and  Amortization  -- Fixed assets are recorded at
cost.  Depreciation and amortization are computed using the straight-line method
over the estimated  useful lives of the related  assets or over the terms of the
related  leases,  whichever  is  shorter  (three to ten  years).  Capital  lease
amortization is included in depreciation and amortization expense.  Renewals and
replacements which extend the useful life of the fixed asset are capitalized.

Intangible  Assets --  Intangible  assets are recorded at cost.  The Company has
classified as goodwill the cost in excess of fair value of the net assets of the
companies  acquired  in  purchase  transactions.  Intangible  assets,  excluding
goodwill, are amortized using the straight-line method over periods ranging from
five to 15 years.  Goodwill is  amortized  over  periods  ranging  from 20 to 25
years.

Software   Development  Costs  --  The  Company   capitalizes  certain  software
development costs in accordance with Statement of Financial Accounting Standards
No. 86,  Accounting for the Costs of Computer  Software to be Sold,  Leased,  or
Otherwise  Marketed  (SFAS 86).  Capitalization  of software  development  costs
begins upon the  establishment of  technological  feasibility as defined in SFAS
86. The establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized  software  development costs require  considerable
judgment by management with respect to certain external factors  including,  but
not limited to,  technological  feasibility,  anticipated future gross revenues,
estimated economic life, and changes in software and hardware technologies.

Capitalized software costs are amortized using the straight-line method over the
estimated revenue or economic life of the related product. The Company amortized
$200,000 of such costs in 1994.  In 1995,  the Company  determined  the software
development costs had no future value, and accordingly,  wrote-off the remaining
costs of $568,000.Research and development  expenditures are charged to research
and development expense in the period incurred.

Warranty Reserve -- The Company generally provides customers with limited 90-day
to one-year  warranties.  The liability for future  warranty claims reflects the
estimated  future cost of  warranty  repairs on products  previously  sold.  The
Company  recognizes the estimated  cost of warranty  obligations at the time the
related  products are sold and  periodically  evaluates and adjusts the warranty
reserve to the extent actual warranty experience varies from original estimates.

Stock Options -- Prior to January 1, 1996,  the Company  accounted for its stock
option plan in accordance  with the  provisions of Accounting  Principles  Board
("APB")  Opinion No. 25,  Accounting for Stock Issued to Employees,  and related
interpretations.  As such, compensation expense would be recorded on the date of
grant only if the current  market  price of the  underlying  stock  exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting
for  Stock-Based  Compensation,  which permits  entities to recognize as expense
over the vesting period the fair value of all stock-based  awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions  of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based  method defined in SFAS No. 123 had been
applied.  The Company has  elected to  continue to apply the  provisions  of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
<PAGE>

Disclosure About the Fair Value of Financial  Instruments  --The carrying amount
of cash and cash equivalents, accounts receivable, accounts payable, and accrued
expenses,  approximate  fair  values  because  of the  short  maturity  of these
instruments.  The carrying  amounts of long-term  debt  approximate  fair values
because the applicable  interest rates  approximate  current market rates.  Fair
value  estimates are made at a specific point in time,  based on relevant market
information and information about the financial instruments.

Impairment of Long-Lived  Assets and Long-Lived  Assets To Be Disposed Of -- The
Company  adopted the  provisions of SFAS 121,  Accounting  for the Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed  Of, on January 1,
1996. This Statement  requires that long-lived  assets and certain  identifiable
intangibles   be  reviewed  for  impairment   whenever   events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceed the fair value of the assets.  Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial  position,  results of  operations,  or  liquidity.  Use of  Estimates
--Management  of the  Company  has made a number of  estimates  and  assumptions
relating  to the  reporting  of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities  to  prepare  these  consolidated  financial
statements in conformity with generally accepted  accounting  principles.  These
estimates  are  subjective  in nature and involve  uncertainties  and matters of
significant judgment and therefore, cannot be determined with precision. Changes
in assumptions could  significantly  affect the estimates.  Actual results could
differ from those estimates.

Income Taxes -- Income  taxes are  accounted  for under the asset and  liability
method.  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit  carryforwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Reclassifications  -- Certain  reclassifications  have been made to the 1995 and
1994 financial statements to conform with the 1996 presentation.
<PAGE>

2. Short-Term Investments

The book value,  gross unrealized gains and losses, and fair value of short-term
investment securities held to maturity as of December 31, are as follows:

                                                        1996        1995
                                                        ----        ----
Municipal bonds
         Amortized cost .....................       $13,835,000    $2,750,000
         Unrealized gains....................           202,000        39,000
         Unrealized losses...................                --            --
                                                     ----------    ----------
         Fair value .........................       $14,037,000    $2,789,000
                                                    ===========    ==========

All of the above investment securities will generally mature in 1997.

3. Inventories

Inventories are comprised of the following:
December 31,                                             1996           1995
                                                         ----           ----
Raw materials ................................       $6,810,000     $8,221,000
Work in process ..............................          934,000        940,000
Finished goods ...............................        3,838,000      5,221,000
                                                      ---------      ---------
                                                    $11,582,000    $14,382,000
                                                    ===========    ===========

4. Fixed Assets

Fixed assets are comprised of the following:
December 31,                                             1996           1995
                                                         ----           ----
Land ..........................................        $286,000       $264,000
Building ......................................       1,026,000        948,000
Leasehold improvements ........................       1,100,000      1,043,000
Machinery and equipment .......................      14,606,000     12,820,000
Furniture, fixtures, and equipment ............       5,190,000      2,838,000
Automobiles ...................................         316,000        172,000
                                                        -------        -------
                                                     22,524,000     18,085,000
Accumulated depreciation
         and amortization ......................    (14,274,000)   (11,795,000)
                                                    -----------    ----------- 
                                                     $8,250,000     $6,290,000
                                                     ==========     ==========

Included  above are assets  under  capital  leases  amounting  to  $154,000  and
$144,000, net of accumulated amortization of $49,000 and $54,000 at December 31,
1996 and 1995, respectively.

5. Intangible Assets

Intangible assets are comprised of the following:
December 31,                                            1996           1995
                                                        ----           ----
Goodwill ........................................   $11,082,000    $11,055,000
Patents and technology rights ...................     2,687,000      2,758,000
Covenants not to compete ........................     1,175,000      1,375,000
                                                      ---------      ---------
                                                     14,944,000     15,188,000
                                                     
Accumulated amortization ........................    (2,480,000)    (1,876,000)
                                                     ----------     ---------- 
                                                    $12,464,000    $13,312,000
                                                    ===========    ===========
<PAGE>

6. Long-Term Debt

Long-term debt is comprised of the following:
December 31,                                               1996        1995
                                                           ----        ----

7.5% note payable in monthly
installments of $9,000, including
interest, with final payment
due September 1998;
secured by equipment .....................              $163,000    $257,000

First mortgage note payable in 
monthly  installments of (pound)
2,000  ($3,600 at December 31,
1996), interest due quarterly 
at the UK base rate plus 1.75% 
(7.75% at December 31, 1996),
due April 2014 ...........................               606,000     593,000

Note  payable  from  Stadia  
acquisition,  two annual  
installments  of $500,000
(discounted using 6% discount
rate) due to former owner, final
 installment paid in March 1996 ..........                  --       445,000

Note payable from Cognitive  
acquisition,  five annual  
installments of $500,000
(discounted using 8% discount 
rate) due to former owner, final
 installment due August 1999 .............             1,289,000   1,656,000

Capital lease obligations for
equipment, interest rates ranging
from 7.3% to 10.6% per annum,
secured by equipment .....................               154,000     144,000
                                                         -------     -------
                                                       2,212,000   3,095,000
Less current portion .....................               577,000     980,000
                                                         -------     -------
                                                      $1,635,000  $2,115,000
                                                      ==========  ==========
<PAGE>

Maturities of long-term debt are as follows:
                                              Capital   Total Long-
                                    Debt       Leases    Term Debt
                                    ------------------------------
                                      
 1997.........................    $520,000     $75,000    $595,000
 1998.........................     538,000      23,000     561,000
 1999.........................     498,000      21,000     519,000
 2000.........................      35,000      56,000      91,000
 2001.........................      35,000        --        35,000
Thereafter                         432,000        --       432,000
                                   -------     -------     -------
                                 2,058,000     175,000   2,233,000
Less imputed interest                 --        21,000      21,000
                                    ------      ------      ------
                                 2,058,000     154,000   2,212,000
Less current portion               521,000      56,000     577,000
                                   -------      ------     -------
                                $1,537,000     $98,000  $1,635,000
                                ==========     =======  ==========

On August 15, 1996, the Company renewed a $6.5 million line of credit  agreement
originally  signed on August 15, 1994. The line of credit  includes a subfeature
to issue standby and/or commercial letters of credit not to exceed $1.5 million.
The outstanding principal balance of the line of credit shall bear interest at a
rate per annum equal to the prime rate in effect from time to time.
No draws were made against this line of credit in 1996 or 1995.

7. Operating Leases

Leases  that do not meet the  criteria  for  capitalization  are  classified  as
operating  leases with related  rentals  charged to operations as incurred.  The
Company leases  manufacturing  and office  facilities at various locations under
operating leases which expire at various dates through 2004.  Management expects
that in the normal  course of  business,  leases  that expire will be renewed or
replaced  with   comparable   leases.   Future   minimum  lease  payments  under
noncancelable  operating leases (with initial lease terms in excess of one year)
as of December 31, 1996, are as follows: 

Years ending December 31, 
  1997...............................         $654,000
  1998...............................          442,000 
  1999...............................          365,000 
  2000...............................          361,000 
  2001...............................          275,000 
  Thereafter.........................          412,000
                                               -------
                                            $2,509,000
                                            ==========

Total rent expense for operating leases was $1,181,000, $1,202,000, and $974,000
for 1996, 1995, and 1994, respectively.
<PAGE>

8. Capital Stock and Stock Options Plans

The  Company  has  authorized  1,000,000  shares of no par  preferred  stock and
28,500,000  shares of no par  common  stock.  The terms  and  conditions  of the
preferred  stock,  of which no shares have been issued,  are set by the Board of
Directors of the Company.

On September 12, 1995, the Board of Directors  declared a  three-for-two  common
stock split  distributable  on October 2, 1995 to  shareholders of record at the
close of business on September  22, 1995.  All per share  amounts and numbers of
shares in the accompanying  consolidated financial statements have been restated
to reflect the stock split.

In 1993 DH  Technology,  Inc.  adopted the 1992 Stock Plan (the "1992  Plan") to
replace the 1983 Stock Option Plan which had expired.  Under the 1992 Plan,  the
Board of Directors may grant incentive stock options to purchase common stock at
prices  which  are not less  than  fair  market  value at the date of grant  and
non-qualified  stock  options  at  prices  which  are  to be  determined  by the
Compensation  Committee of the Board of Directors.  In April 1994,  the plan was
amended to place a  1,050,000  share  limit on the  number of options  and stock
appreciation  rights (SARs) that may be granted under the plan to an employee in
any fiscal year. The total number of shares authorized for grant is 1,473,470.

Stock options  generally  become  exercisable in four equal annual  installments
commencing  one year from the date of grant and  expire  within  either  five or
eight years from the date of grant. As of December 31, 1996, options to purchase
a total of 992,400  shares of common  stock  were  outstanding,  and  options to
purchase 641,242 shares of common stock were exercisable.

The  Company  has a  Director  Warrant  Plan  under  which  each of the  outside
directors,  upon first  becoming a  director,  is granted an initial  warrant to
purchase 15,000 shares of the Company's common stock. In addition, each director
automatically  receives an additional warrant to purchase 5,250 shares each year
beginning in the fifth year after the grant of the initial warrant. The exercise
price of the warrants granted is equal to the fair market value of the Company's
common stock at the date of grant.  Each initial  warrant  vests as to 1/48th of
the shares subject  thereto for each full calendar month after the date of grant
that the holder of such  initial  warrant  remains a member of the  Board.  Each
annual warrant vests one year after the date of grant,  subject to the holder of
such annual warrant remaining a member of the Board during such one-year period.
A total of 225,000  common  shares is reserved for  issuance  under the Director
Warrant Plan. As of December 31, 1996,  warrants to purchase 136,000 shares have
been granted, of which 64,500 have been exercised and 15,000 have been purchased
by the Company and subsequently terminated. As of December 31, 1996, warrants to
purchase  a total  of  72,750  shares  are  outstanding,  of  which  51,750  are
exercisable.
<PAGE>
<TABLE>
<CAPTION>

Information with respect to activity under the plans is set forth below:

                                  # of shares    # of Options/     Price per     Weighted Avg.     Aggregate
                                Avail for Grant    Warrants          share          Exercise         Price
                                                  Outstanding                        Price
----------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>              <C>               <C>          <C>        
Balance - December 31, 1994         685,790       1,014,863        4.42-13.50        $8.38        8,506,000
Shares Reserved                     375,000              --                --           --               --           
Options/warrants granted           (332,700)        332,700       14.00-18.67        17.69        5,884,000
Options/warrants canceled            94,031         (97,781)       4.42-11.17         7.77         (917,000)               
Options/warrants exercised               --        (158,945)       4.42-11.17         9.38       (1,235,000)
----------------------------------------------------------------------------------------------------------------
Balance - December 31, 1995         822,121        1,090,837       4.42-18.67       $11.28       12,238,000
                                                                         
Options/warrants granted            (55,500)          55,500      23.38-23.75        23.03        1,346,000
Options/warrants canceled               750             (750)     18.67-18.67         8.18          (14,000)
Options/warrants exercised               --          (80,437)      4.42-11.17        18.67         (657,000)
----------------------------------------------------------------------------------------------------------------
Balance - December 31, 1996         767,371        1,065,150       4.42-23.75       $12.12       12,913,000
================================================================================================================
</TABLE>

Information  with respect to options  outstanding  and  exercisable  by exercise
price range at December 31, 1996 is set forth below:
<TABLE>
<CAPTION>

                                                   Outstanding                                            Exercisable
                         -------------------------------------------------------------      ----------------------------------------
                                                Weighted Average
                           Number of Options/       Remaining         Weighted Average       Number of Options/     Weighted Average
Range of Exercise Price  Warrants Outstanding    Contractual Life       Exercise Price      Warrants Exercisable     Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
 <S>                           <C>                      <C>                  <C>                  <C>                     <C>     
 $4.42-$4.42                    60,000                  1.8                  $4.42                 60,000                 $4.42
 $6.64-$9.95                   406,950                  3.3                  $7.48                397,760                 $7.48
 $9.96-$14.92                  264,750                  5.6                 $11.92                143,809                $11.71
$14.93-$22.38                  280,950                  6.4                 $18.54                 91,423                $18.48
$22.39-$23.75                   52,500                  6.4                 $23.54                     --                    --
=========================================================================================================
</TABLE>
<PAGE>

At December 31, 1996 and 1995,  the number of options and  warrants  exercisable
was  692,992  and  566,501,  and the  weighted-average  exercise  price of those
options and warrants was $9.54 and $7.99, respectively.

The per share  weighted-average fair value of stock options and warrants granted
during 1996 and 1995 was $13.62 and $10.44,  respectively,  on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions:  1996-expected  dividend yield of 0.0%,  stock  volatility  rate of
48.50%,  risk-free interest rates of 6.15% and 6.40%, and expected lives of five
and eight years;  1995-expected dividend yield of 0.0%, stock volatility rate of
48.50%,  risk-free interest rates of 6.15% and 6.40%, and expected lives of five
and eight years.

The  Company  applies  APB  Opinion  No.  25 in  accounting  for its  Plan,  and
accordingly,  no compensation  cost has been recognized for its stock options in
the financial statements.  Had the Company determined compensation cost based on
the fair value at the grant date for its stock  options  under SFAS No. 123, the
Company's net income would have been reduced to the pro forma amounts  indicated
in the following table.
                             1996            1995
                             ----            ----
Net income
         As reported     $13,027,000     $10,301,000
         Pro forma .     $12,203,000      $9,868,000
Net income per share
         As reported           $1.56           $1.24
         Pro forma .           $1.46           $1.18

Pro forma net income reflects only options granted in 1996 and 1995.  Therefore,
the full impact of  calculating  compensation  cost for stock options under SFAS
No. 123 is not reflected in the pro forma net income amounts  presented above as
compensation  cost is reflected  over the options'  vesting period of four years
and  compensation  cost for  options  granted  prior to  January  1, 1995 is not
considered.

9. Geographic and Industry Segment Information

The Company  operates in one  industry  segment:  the design,  manufacture,  and
distribution of transaction printers and mechanisms, impact printheads, bar code
printers, and related services and supplies, such as labels and ribbons.

Export revenue amounted to $10,617,000,  $10,234,000,  and $8,719,000,  in 1996,
1995,  and 1994,  respectively,  or 9% of total  revenue  in 1996,  10% of total
revenue in 1995, and 11% of total revenue in 1994.
<PAGE>

In 1996 one customer accounted for 13% of total revenue, or $15,042,000;  and no
customer accounted for more than 10% of total revenue in 1995 or 1994.
Information  about the  Company's  operations  by  geographic  location is shown
below:
                             Revenue from
                             Unaffiliated     Operating         Identifiable
                              Customers        Profits             Assets
1996
United States                $91,544,000     $15,361,000       $84,754,000
Europe                        13,294,000       1,829,000         6,957,000
Australia                     10,946,000       1,945,000         5,394,000
                              ----------       ---------         ---------
Total                       $115,784,000     $19,135,000       $97,105,000
                            ============     ===========       ===========

1995
United States                $77,817,000     $12,157,000       $72,417,000
Europe                        11,671,000       2,005,000         6,708,000
Australia                      9,367,000       1,036,000         6,160,000
                               ---------       ---------         ---------
Total                        $98,855,000     $15,198,000       $85,285,000
                             ===========     ===========       ===========

1994
United States                $62,631,000      $9,691,000       $61,518,000
Europe                        10,607,000       1,370,000         6,764,000
Australia                      4,680,000         431,000         3,024,000
                               ---------         -------         ---------
Total                        $77,918,000     $11,492,000       $71,306,000
                             ===========     ===========       ===========

10. Acquisitions

On February 28, 1994, DH Technology,  Inc. acquired all of the outstanding stock
of Stadia  Colorado Corp.  (Stadia)  pursuant to a stock purchase  agreement for
$6.5 million in cash ($5.5  million paid at closing and  additional  payments of
$500,000 paid in 1995 and 1996). This business is being operated as a subsidiary
of DH Technology,  Inc. under the name Stadia Colorado Corp. Stadia,  located in
Golden,  Colorado,  supplies  labeling  and  marking  solutions  to a variety of
customers across the United States.

On August 31, 1994, DH Technology, Inc. acquired all of the outstanding stock of
Cognitive Solutions,  Inc. (Cognitive) and certain technology rights pursuant to
a stock  purchase  agreement  for $10 million in cash ($8.5 million paid through
1996, and additional  payments of $500,000 each due in 1997 through 1999). Also,
the Company is required to make additional payments,  not to exceed an aggregate
of $3 million,  to the former shareholder of Cognitive based upon net sales of a
specified  Cognitive  product line. These additional  payments,  if any, will be
recorded as additional  goodwill and represent the increased  value of Cognitive
that was  purchased.  As of December 31, 1996 no  additional  payments have been
made.  This business is being  operated as a subsidiary of DH  Technology,  Inc.
under  the  name  Cognitive  Solutions,  Inc.  and is  located  in Paso  Robles,
California.  Cognitive  designs,  manufactures,  and  markets  thermal  bar code
printers  and  complementary  label media for use in automatic  data  collection
systems.
<PAGE>

The Stadia and  Cognitive  acquisitions  were  accounted  for using the purchase
method;  accordingly,  the assets and liabilities of the acquired companies have
been recorded at their  estimated  fair values at the dates of  acquisition.  In
conjunction  with the  acquisitions  of  Stadia  and  Cognitive,  the  excess of
purchase  price over the  estimated  fair values of the net assets  acquired has
been recorded as goodwill of $4,062,000 and $5,590,000,  respectively,  which is
being  amortized  over 25 years  using the  straight-line  method  (Note 5). The
accompanying  consolidated statements of income include the operations of Stadia
from February 28, 1994, and Cognitive from August 31, 1994.

On October 30, 1995, the Company  acquired certain assets and liabilities of Mos
Magnetics,  a privately held company in San Diego,  California,  for $752,000 in
cash. Mos Magnetics designs,  manufactures,  and markets magnetic read and write
heads and modules for credit card and debit card  readers,  check  readers,  and
airline ticket  readers.  This  acquisition was accounted for using the purchase
method. In conjunction with this acquisition,  the Company has recorded goodwill
of  $239,000,  which is being  amortized  over 25 years using the  straight-line
method.

11. Employee Benefit Plans

In 1989, the Company  adopted a contributory  profit-sharing  plan for employees
meeting certain service requirements. The plan qualifies under Section 401(k) of
the Internal Revenue Code and allows eligible  employees to contribute up to 15%
of their  compensation.  The Company provides a guaranteed  contribution of $240
per  eligible  employee  per  year,  and  based on  profitability,  matches  the
employee's  contribution  up to a  maximum  of six  percent  of  the  employee's
compensation.  The  guaranteed  payments  made  by the  Company  were  $109,000,
$96,000,  and $74,000,  and the Company's matching  contributions were $108,000,
$72,000, and $56,000, during 1996, 1995, and 1994, respectively.  Total expenses
paid by the Company in 1996, 1995, and 1994 for the  administration  of the plan
were $15,000, $18,000, and $16,000, respectively.

12. Income Taxes

Components of income before income taxes are as follows:

                                        1996              1995              1994
                                        ----              ----              ----
United States ............       $16,288,000       $13,004,000       $10,297,000
Foreign ..................         4,189,000         3,149,000         1,839,000
                                   ---------         ---------         ---------
                                 $20,477,000       $16,153,000       $12,136,000
                                 ===========       ===========       ===========

The Company's income taxes consist of the following:

                                         1996             1995             1994
                                         ----             ----             ----
Current income taxes:
         Federal ............     $ 5,989,000      $ 4,685,000      $ 3,386,000
         State ..............         698,000          663,000          412,000
         Foreign ............       1,463,000        1,162,000          709,000
Deferred income taxes .......        (700,000)        (658,000)        (429,000)
                                     --------         --------         -------- 
Total income taxes ..........     $ 7,450,000      $ 5,852,000      $ 4,078,000
                                  ===========      ===========      ===========
<PAGE>

The following table summarizes the difference between the U.S. federal statutory
effective income tax rate and the Company's effective income tax rate:

                                                   1996       1995        1994
                                                   ----       ----        ----
U.S. federal statutory
         income tax rate ...................      34.6%       34.2%       34.0%
State taxes, net of
         federal tax benefit ...............       2.2%        2.7%        2.2%
Nontaxable dividends
         and interest income ...............      (2.0%)      (1.9%)      (2.0%)
Nondeductible
         goodwill amortization .............       0.7%        0.9%        1.2%
Research and
         development credits ...............      (0.5%)      (1.1%)      (1.8%)
Difference between
         U.S. statutory
         and foreign
         effective tax rates ...............       0.1%        0.5%        0.4%
Change in
         valuation allowance ...............      (1.5%)      (2.1%)        -- 
Other, net .................................       2.8%        3.0%       (0.4%)
Effective income
         tax rate ..........................      36.4%       36.2%       33.6%

The tax effects of significant temporary differences
which comprise deferred tax assets and liabilities consist of the following:

December 31,                                               1996          1995
                                                           ----          ----
Deferred tax assets:

         Allowance for doubtful accounts ..........      $363,000      $334,000
         Inventory ................................       788,000       943,000
         Depreciation and amortization ............       206,000            --
         Self insurance ...........................       271,000       222,000
         Accrued warranty .........................       162,000       166,000
         Accrued payroll ..........................       233,000       178,000
         Other ....................................       272,000       201,000
                                                          -------       -------
                  Gross deferred tax assets .......     2,295,000     2,044,000
                  Deferred tax assets
                           valuation allowance ....            --      (300,000)
                                                          -------      -------- 
                                                        2,295,000     1,744,000
Deferred tax liabilities:
         Depreciation and amortization ............            --       149,000
                                                          -------       -------
         Gross deferred tax liabilities ...........            --       149,000
                                                          -------       -------
Net deferred tax asset ............................   $ 2,295,000   $ 1,595,000
                                                      ===========   ===========
Reflected on the accompanying
         consolidated balance sheets as:
                  Current deferred
                  tax asset, net ..................   $ 2,089,000   $ 1,744,000
                  Noncurrent deferred
                  tax asset (liability) ...........       206,000      (149,000)
                                                          -------      -------- 
Net deferred tax asset ............................   $ 2,295,000   $ 1,595,000
                                                      ===========   ===========
<PAGE>

The  valuation  allowance for deferred tax assets as of January 1, 1996 and 1995
was $300,000 and $641,000,  respectively.  The net change in the total valuation
allowance  for the years  ended  December  31,  1996 and 1995 was a decrease  of
$300,000 and $341,000,  respectively. In assessing the realizability of deferred
tax assets,  management  considers  whether it is more likely than not that some
portion or all of the  deferred  tax assets will not be  realized.  The ultimate
realization  of deferred tax assets is dependent  upon the  generation of future
taxable income during the periods in which those  temporary  differences  become
deductible.   Management  considers  the  scheduled  reversal  of  deferred  tax
liabilities,  projected  future taxable income,  and tax planning  strategies in
making this  assessment.  Based upon the level of historical  taxable income and
projections  for future  taxable  income over the periods which the deferred tax
assets  are  deductible,  management  believes  it is more  likely  than not the
Company will realize the benefits of these deductible differences.
<PAGE>

Independent Auditors' Report

To the Board of Directors and Shareholders of DH Technology, Inc.:

We have audited the accompanying  consolidated  balance sheets of DH Technology,
Inc.  and  subsidiaries  as of  December  31,  1996 and  1995,  and the  related
consolidated statements of income, shareholders' equity, and cash flows for each
of  the  years  in  the  three-year   period  ended  December  31,  1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of DH Technology,  Inc.
and  subsidiaries  as of December  31,  1996 and 1995,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.

                                  /s/ KPMG Peat Marwick LLP/

San Diego, California
February 12, 1997
<PAGE>

Common Stock Information

The  Company's  common  stock is traded on the NASDAQ  National  Market  System,
trading  symbol DHTK. As of December 31, 1996,  there were 466  shareholders  of
record of DH Technology, Inc. common stock. The Company has never paid dividends
on its  common  stock  nor does it expect to pay  dividends  in the  foreseeable
future.  The following  table sets forth the high and low closing  prices of the
Company's stock for the eight most recent quarters.

                                  December 31, 1996         December 31, 1995
Years ended                          High    Low               High     Low  
--------------------------------------------------------------------------------
First Quarter                      $24.50  $21.25            $16.17   $13.83
Second Quarter                      27.75   22.00             19.41    13.83
Third Quarter                       26.50   22.50             22.17    17.33
Fourth Quarter                      25.25   22.75             24.75    19.00

Quarterly Financial Information (Unaudited)

Quarters ended 1996                       March 31   June 30   Sept 30   Dec 31
--------------------------------------------------------------------------------
(In thousands, except per share data)
Total revenue ..........................   $28,196   $29,210   $29,851   $28,527
Gross margin ...........................     9,726    10,239    10,621    10,351
Income before income taxes .............     4,762     5,226     5,321     5,168
Net income .............................     3,035     3,291     3,379     3,322
Net income per share ...................   $  0.36   $  0.39   $  0.40   $  0.40

Quarters ended 1995                       March 31   June 30   Sept 30   Dec 31
--------------------------------------------------------------------------------
Total revenue ..........................   $23,255   $24,317   $25,278   $26,005
Gross margin ...........................     8,495     8,786     8,840     9,467
Income before income taxes..............     3,651     3,841     4,116     4,545
Net income .............................     2,365     2,497     2,656     2,783
Net income per share ...................     $0.29     $0.30     $0.32     $0.33
<PAGE>

Transfer Agent and Registrar
American Stock Transfer &
Trust Company
40 Wall Street
New York, New York 10005

Legal Counsel
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050

Independent Auditors
KPMG Peat Marwick LLP
750 B Street, Suite 3000
San Diego, California 92101

Corporate Headquarters
DH Technology, Inc.
15070 Avenue of Science
San Diego, California 92128
Telephone: 619-451-3485
Fax: 619-451-3573

Form 10-K
The Company files an annual report with the Securities  and Exchange  Commission
on form 10-K, pursuant to the Securities Exchange Act of 1934.  Shareholders may
obtain a copy of this report without cost by writing:
Chief Financial Officer
DH Technology, Inc.
15070 Avenue of Science
San Diego, California 92128

Annual Meeting
The meeting of shareholders will
be held at 10:00 a.m. on Thursday, April 24, 1997, at the Sheraton
Hotel West Tower on Harbor Island, San Diego, California.
<PAGE>

Directors
William H. Gibbs
Chairman of the Board
William J. Bowers
Retired Chairman,
MSI Data Corporation
Bruce G. Klass
Attorney at Law
Don M. Lyle
Independent Consultant
George M. Ryan
Investor

Executive Management
William H. Gibbs
President and Chief Executive Officer
David T. Ledwell
Executive Vice President
Transaction Products
Walter S. Sobon
Chief Financial Officer
Janet W. Shanks
Corporate Controller and
Chief Accounting Officer
Endre D. Vargha
Vice President and General Manager
Cognitive Solutions, Inc.
Steven D. Anton
Vice President and General Manager
Stadia Colorado Corporation
Russell C. Willcox
Managing Director
DH Technology plc
Vaughan Blackwood
Warwick Dennett
Co-Managing Directors
DH Technology pty


Locations United States Albuquerque,  NM Atlanta,  GA Charlotte,  NC Chicago, IL
Dallas, TX Dayton, OH Denver, CO Paso Robles, CA Phoenix, AZ Riverton, WY
Salt Lake City, UT
San Diego, CA
Mexico
Tijuana
England
Manchester
Australia
Hornsby, NSW
<PAGE>

                                   EXHIBIT 21


                              LIST OF SUBSIDIARIES



DH Technology, Inc. presently has the following subsidiaries:


     DH Technology plc., a United Kingdom  corporation,  of which DH Technology,
     Inc. owns all of the outstanding stock.

     DH Tecnologia de Mexico, S.A. de C.V., a Mexican  corporation,  of which DH
     Technology, Inc. owns all of the outstanding stock.

     DH Technology pty., an Australian corporation, of which DH Technology, Inc.
     owns all of the outstanding stock.

     Stadia Colorado Corp., a Colorado corporation, of which DH Technology, Inc.
     owns all of the outstanding stock.

     Cognitive  Solutions,   Inc.,  a  California   corporation,   of  which  DH
     Technology, Inc. owns all of the outstanding stock.




<PAGE>


                                  EXHIBIT 23.1


              Independent Auditors' Consent and Report on Schedule




To the Board of Directors and Shareholders of DH Technology, Inc.:

The audits  referred to in our report  dated  February  12,  1997,  included the
related  financial  statement  schedule as of December 31, 1996, and for each of
the years in the three-year period ended December 31, 1996, included in the Form
10-K. This financial  statement  schedule is the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion  on this  financial
statement schedule based on our audits. In our opinion, this financial statement
schedule,  when  considered in relation to the financial  statements  taken as a
whole,  presents  fairly in all  material  respects  the  information  set forth
therein.

We consent to incorporation by reference in the registration  statements on Form
S-8 (Nos.  33-5110;  33-29911;  33-50532;  33-75798) of DH Technology,  Inc. and
subsidiaries,   of  our  report  dated  February  12,  1997,   relating  to  the
consolidated  balance  sheets of DH  Technology,  Inc.  and  subsidiaries  as of
December 31, 1996, and 1995, and the related consolidated  statements of income,
shareholders'  equity,  and cash  flows for each of the years in the  three-year
period ended  December 31, 1996,  which report  appears in the December 31, 1996
annual report on Form 10K of DH Technology, Inc.

We also consent to the use of our report on the schedule included herein.

                             /s/ KPMG Peat Marwick LLP/
                         

San Diego, California
March 27, 1997